China's e-retail giant Alibaba may soon have a direct presence in the Indian online retail space as there are reports that Paytm will spin off its marketplace business next month.

The reports say the final paperwork is in place and it could be launched officially next month. However, there is no official confirmation.

The Indian online retail space is dominated by Flipkart and Amazon, and with Alibaba Group's direct entry, the competition is expected to get tougher.

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Alibaba had shown interest in Indian online retail back in 2014, but it was only in March 2016 that Jack Ma's group confirmed plans to enter Indian e-commerce. There are reports that Alibaba is likely to start its business-to-consumer site Tmall in India with Future Group led by Kishore Biyani. The Chinese e-commerce major has been watching the Indian e-commerce space for a while now to understand the behaviour and pattern of Indian consumers.

Meanwhile, Vijay Shekhar's Paytm is also trying to cash in on the festive spending by planning a three-day Maha Bazaar sale starting 12 October, with its USP being cashback. The sale could face competition from Snapdeal's sale which begins on the same day.